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Who needs an app?

June 1, 2016 03:54 PM

When Blue Apron Inc. launched in 2012, it knew selling on mobile would be an important part of its strategy, says Ilia Papas, Blue Apron’s chief technology officer and co-founder.

The web-only retailer of make-at-home meal kit subscriptions had its mobile-optimized site up by summer 2013, however, it didn’t debut a mobile app until July 2015. Papas says the e-retailer, which grew its sales 80% last year to an Internet Retailer-estimated $117.0 million, didn’t want to add the workload and technical expertise an app would require until it felt secure in the technology and staff managing its desktop and mobile sites.

Blue Apron got to work on the iOS app in early 2015. It developed the app in-house and with the help of mobile technology vendor Mobispoke, which has since been acquired by agency Kurt Salmon Digital. It took about five months to build the app and Blue Apron now has five people—a mobile product manager, three engineers and a designer—who work full-time maintaining and adding features to mobile, Papas says. He declines to say what Blue Apron paid to create the app.

Nearly a year after the app’s launch, approximately 30% of Blue Apron’s subscribers use the app on at least a monthly basis, Papas says. The e-retailer is seeing evidence that app users are more engaged with the brand and its product offerings than non-app users. For example, app users are more likely to watch cooking demonstration videos or browse other products, such as a handmade chef’s knife, that Blue Apron has for sale. These features are available on the Blue Apron site, but are not featured as prominently as they are in the app.

Blue Apron’s app experience echoes that of several other larger e-retailers that can likewise claim a lot of repeat customers. Consumers are more likely to download and use apps for businesses they frequently shop with. But the early app experiences of online retailers that don’t sell products that need regular replenishment or encourage repeat visits are less sure how apps apply to their businesses.

Online merchants’ app adoption rates show that many have not bought into apps. Looked at in aggregate, 257 e-retailers in the 2016 Internet Retailer Top 500 Guide have a mobile app. A year earlier, 228 Top 500 e-retailers had an app and, in 2014, 214 had an app. Within the Second 500, adoption has been much lower, with only 64 having apps today, a slight rise from 48 a year earlier.

Second 500 web-only retailer Brian Gavin Diamonds is one of those merchants, having launched its app—which it spent between $10,000 and $15,000 to build—in January 2013. The jewelry e-retailer says it will shutter that app soon, but it is planning to launch a new app before the holiday season. Danny Gavin, vice president and director of marketing, says the app has been downloaded 5,000-10,000 times.

That first app is non-transactional, but provides images of the retailer’s jewelry. Brian Gavin Diamonds has otherwise used the app to push coupons and offers to shoppers, Gavin says.

“The app didn’t necessarily provide anything different than the website,” Gavin says, adding that it is hard to say whether the app was a worthwhile investment. “Because it didn’t have an e-commerce factor, kind of like a standard app, it’s difficult to measure ROI,” he says.

Apps are great for larger retailers that sell products that everybody needs, like Amazon.com Inc. and Wal-Mart Stores Inc., Gavin says. Since not everyone is buying diamonds regularly, Gavin knows that his app will have to provide something new to shoppers that the mobile site doesn’t provide.

“The app will help them in a way the website hasn’t,” he says.

The majority of the e-retailer’s business is from engagement ring purchases, and so many of its shoppers are one-time customers. That means that even if they downloaded and used the app, it tended to be for a limited time until they made a buying decision. Gavin says the average app user accessed the app six to 10 times. The next app, Gavin says, will have e-commerce functionality and app-only features. Brian Gavin Diamonds is still in negotiations about the cost of the app, but Gavin imagines the app will cost less than $50,000, he says.

“We’re going to find a way where it integrates with the shopping process,” Gavin says. “Shoppers don’t have to have it, but we are creating a way that it would be a good idea to use the app.”

“Every retailer needs to weigh the trade-offs of how you build an app and what functionality the app may have,” says Julie Ask, principal analyst at Forrester Research Inc. “Apps are for the intersection of customers who access and shop with a retailer frequently, and those that are what we call shifted—who expect to get anything, anytime, anywhere on a mobile device.”

Not surprisingly, it is a retailer’s frequent shoppers who will download an app. 83% of smartphone-owning adults agree with the statement, “I download apps for the services I use most often,” according to a Forrester Research survey in Q4 2015 of 825 U.S. smartphone owners.

Most often, those are apps operated by chain retailers, which enjoy brand recognition and can generate sales online and offline. Digital analytics firm SimilarWeb Ltd. ranked the 90 Android apps from the top 100 e-retailers by the percent of consumers who downloaded the app and how often those consumers open it, and, with the exception of Amazon and Etsy Inc., apps from large retail chains—including Wal-Mart, Target Corp., Home Depot Inc. Kohl’s Corp., Best Buy Co. Inc. and Lowe’s Co. Inc.—dominated the top of the list (see chart on page 124).

Parsing Top 500 e-retailers into smaller groupings reveals more about who might benefit most from apps. Of the 257 Top 500 merchants with apps, 90 of them rank in the top 100; 57 rank between 101 and 200; 49 rank between 201 and 300; 35 rank between 301 and 400; and 26 rank between 401 and 500. In other words, the bigger the retailer, the greater the app adoption. The top 100 also includes 44 retail chains, most of which have built apps that help consumers shop online as well as in store, which encourages more regular use. For example, Home Depot’s app, which ranks No. 10 in the SimilarWeb ranking, shows consumers where the product they are seeking is in the store, down to the shelf. 2.61% of consumers who have the Android app downloaded open it at least once within 30 days, according to SimilarWeb data, much higher than the 0.54% average for all shopping apps.

Top 500 data about return shoppers, measured as a percentage of repeat web traffic and which suggests loyalty to merchants, also shows that e-retailers with more repeat shoppers are more likely to have an app. The average return shopper rate of Top 500 retailers is 37.48%. Of the Top 500 retailers that have apps, the average return shopping rate bumps up to 42.44%. Among the top 100, the rate is 47.96%.

Subscription-based e-retailers, by nature of their business model, also have more repeat shoppers. For example, Blue Apron’s return shopper rate is 40.79%, according to Internet Retailer’s Top500Guide.com, higher than the 37.48% Top 500 average. Blue Apron ranks No. 231 in the Top 500.

Home Depot, which has a 59.08% return shopper rate, regularly revamps its app to make sure the app fits its customers’ needs. Home Depot initially launched its app in 2009 as a way for consumers to browse products, and added buying capabilities to the app in 2010. Home Depot built the app in-house and has a team of employees continually working on the mobile app, says Prat Vemana, vice president of product management and site operations.

The retailer has amassed 12 million downloads across all of its iOS and Android apps, which includes the flagship app, the Pro app, which is geared toward trade professionals, and Project Color, an app for consumers to help them select a paint color.

“Our more loyal customers are on the app,” says Vemana, who added that app downloads have accumulated steadily over the years. “It’s about the authentic users.”

But not every retailer engenders great loyalty, and an app may not be the best fit for those retailers.

“Retailers will not build an app for just 10 people,” Ask says. “But is the right number 1,000 or 10,000 in the target audience? It’s hard to say. There are too many factors are in play here for hard-and-fast rules.”

Fathead LLC, a Top 500-ranked web-only sports and entertainment decal retailer, has a return shopper rate of 28.6%. The retailer launched an app in 2012 but scrapped it two years later. The Big Shot app used augmented reality technology to let consumers see how a decal would look on her wall before she purchased one, which she had to do on the site. A consumer had to print off a target and tape it to her wall, then open the app, select the Fathead graphic she wanted to see on her wall, then snap a picture of the target from eight to 10 feet away. The target was needed so the app could properly scale the large graphic to the wall. Shiela Jones, director of information technology at Fathead, says Fathead did not get the usage it hoped for.

“The decision to forego the app was more because it was not the right app for us,” Jones says. “While we did have a large number of downloads, it had a manual component requiring a printed target. Additionally, there was a limited set of products. Both of these items created a barrier for app usage.” Fathead would not disclose if it is planning on creating another app.

26.7% of consumers will abandon a shopping app after one use, according to Adobe Systems Inc.’s Digital Index for August 2015, “Mobile Benchmark Report.” One reason that consumers abandon an app is that they don’t see the value in it, says Nancy Hua, co-founder and CEO of mobile optimization vendor Apptimize.

“The thing with apps is that if a user invests the time to download it and waits 30 seconds for it to launch, then it needs to deliver value immediately,” Hua says.

One way to combat this is to have a slick onboarding experience that quickly walks the consumer through the app’s features and how to use it, Hua says. This quick welcome-to-the-app walkthrough should also show consumers what they can do in app that they can’t do on the website, Hua says. This way, from the start, shoppers know what the unique app features are and what the value of having the app is.

“It is fair to say that smaller retailers may not be able to afford an app that will deliver big results,” Ask says. “They may not also have the bandwidth or budget to drive ongoing improvements in the app or ongoing engagement with consumers—both are key to success.”

Retailers need to market the app, continually improve and update it, monitor it to make sure it is both fast and free of bugs, plus remind the consumers that have gone to the trouble of downloading it that they have it on their smartphone.

Members-only retailer DirectBuy Inc., which sold $100 million online last year, built an app-only feature that it says resonates with its customers and keeps them coming back. Ted Fay, senior director of digital marketing and e-commerce at DirectBuy, says the company can attribute $2 million in online sales to the I Want That feature of the app, which launched 10 months ago. Fay says 30,000 shoppers, equal to 15% of its 200,000 members, have used the app.

DirectBuy sells products that it says are priced 30% to 50% less than what they would cost at another retailer. It has more than 1 million SKUs, which are often difficult for shoppers to filter through. “It’s a challenge,” Fay says. “If you say, ‘I want to buy a couch,’ well, I’ve got tens of thousands of couches, and different fabrics. So it’s hard for you to select.”

To help shoppers quickly communicate what they are seeking, DirectBuy decided to incorporate image recognition technology into the app. The feature took more than 18 months to develop and Fay would not say how much it cost.

In DirectBuy’s app, shoppers can take a picture of what they want, and the app will find that product, or a similar one available for purchase through DirectBuy. For example, if a consumer sees a lamp she likes while visiting a friend, she can open the app and tap the I Want That button, which accesses her smartphone’s camera. She takes a picture and fills in answers to a few questions, such as if she knows the manufacturer and her budget. After she hits send, DirectBuy’s image recognition software analyzes the picture and creates a list of possible matches. DirectBuy’s employees go through the match list, which could have around 25 results, and then sends one to three of the best matches to the shopper via email.

DirectBuy is thrilled with the feature’s success, Fay says. 31% of the retailer’s members have made a purchase soon after using the button, he says.

Home Depot has also found the value in having unique app features, such as its Project Color app. Project Color is an example of how a retailer can have an app presence without having the app be specifically commerce-enabled. The app allows consumers to see how a paint color will look on their walls. In the app, consumers take a picture of a room in their house, select any color in Home Depot’s color catalogue and tap a wall to paint it on.

Once a shopper selects a color she will be redirected to Home Depot’s mobile site where she can specify her brand preference, sheen and container size, and then check out. Excluding purchasing in the app was by design, as the app is meant to help shoppers narrow down paint colors, Vemana says. Most shoppers go to the store to buy paint anyway, he says.

“The color app was built for a very laser-focused purpose: helping to acquire the customer for the project,” Vemana says.

Blue Apron is also finding this out about its app—roughly 25% of Blue Apron’s app users aren’t customers, Papas says. A consumer doesn’t have to be a Blue Apron customer to download the app, and non-customers download the app for the roughly 1,000 recipes it contains, Papas says. That’s OK with him, as he hopes the app can help to turn some of those foodies into subscribers.

“The app is a channel to acquire new customers, a channel to engage with our product and order more frequently,” he says.

Not every retailer will need a mobile app, but all retailers should analyze their customer base and business model to see whether there is a fit.